If you take a word-association test
for MBA grads and ask for `Business Environment', 9 out of 10 would say `Dynamic'. Need a testimony?
Ask the once-highflying executives of Indian retail giants. Not long ago, the
drawing boards were full to the brim with the best-laid and re-laid plans to capture
the $350 bn Indian retail market, growing at a Compounded Annual Growth
Rate (CAGR) of 35%. After the recession has set in, following the debacle at the
Wall Street, most of the plans are wrapped up in favor of cost-cutting through
halting the expansion projects or closing some existing outlets or both.
Pantaloons, which had plans to reach a retail space
of 33 million sq ft by the fiscal 2011, now looks to achieve the same by 2013, as
it scales back its own expectations and goes slow on the property
acquisition spree. Aditya Birla Retail, another
leading retailer has pruned its expansion plans to half, while Tata in
collaboration with UK's Tesco has delayed the
rollout of its much-awaited cash-and-carry retail formats in the country. High
interest rates, liquidity crunch, falling
footfalls, supply chain challenges and inflated rental prices have put enormous
pressure on the retailers' operating margins. Even small retailer like
Megamart, which currently has 125 small stores with average size of 2,500-5,000 sq ft,
are not spared. KE Venkatachalapathy, Chief Operating Officer, Megamart,
expressed concern that "the company had planned three to four centers every
year, but has decided to keep the number to two that were already planned for
the year (one each in Faridabad and Bangalore)." Delhi-based Vishal Retail,
which has 172 retail outlets across India, recorded a decline in its profit by 86%
in third quarter and a drastic fall in its stock to Rs 49.60 in February from
its high of Rs 1,001 in January last year. Owing to financial losses and
stock losses the chain has closed 27 stores. To improve its operations, it is planning
to centralize sales and distribution channels and decrease workforce to 70
per store from 200.
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